SBJ/June 20-26, 2016/Media

ESPN stays in the game

Ponies up $1.14B for Big Ten package

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ESPN will buy the second half of the Big Ten’s media rights package, ending months of speculation that the two were about to sever their 50-year relationship.

ESPN will pay an average of $190 million per year over six years for essentially half the conference’s media rights package, according to several sources close to the talks. Two months ago, Fox Sports agreed to take the other half of the package for an average of $240 million per year. CBS Sports also has told the conference that it will renew its basketball-only package for $10 million per year.

Ohio State-Michigan will probably move to Fox Sports.
Photo by: GETTY IMAGES
The six-year, $2.64 billion media rights haul represents a big win for the Big Ten Conference, of course, which will see its average media rights payout nearly triple when it takes effect next fall.

More significantly, the deal is a good sign for the broader sports business, showing that ESPN will remain an active player in the live rights business, especially when it comes to premium rights.

All the headlines of cost cutting and layoffs coming out of Bristol, Conn., during the last 12 months — combined with dropping rights fees from properties like Conference USA — led some industry observers to expect the Disney-owned company to take a pass on Big Ten rights in order to further save costs. Those doubts increased in April when word leaked that ESPN submitted a lowball bid on the first half of the Big Ten’s media package, which ended up going to Fox. By agreeing to pay a hefty fee for a sizable package of rights, ESPN is showing that it is not paralyzed when it comes to paying for the rights that it wants. News of the deal should serve as a much needed morale boost to the company’s rank-and-file.
Who's Up Next?
Major U.S. media rights deals expiring by the end of 2020
Property Current rights holder Length of current deal Year deal expires
NFL Thursday night CBS, NBC* 2 years 2017
Verizon IndyCar Series ESPN, NBC 6 years/10 years 2018
UEFA Champions League Fox 3 years 2018
UFC Fox Sports 7 years 2018
PGA Championship CBS, Turner 10 years 2019
Belmont Stakes NBC 5 years 2020
Note: The total value of the NFL's current Thursday night package is $450 million. Financial terms are unavailable for the other deals listed.
* Each network will air five games and produce four games each for NFL Network.
Source: SportsBusiness Journal research

The six-year agreements with ESPN and CBS are being vetted by lawyers, and Big Ten officials hope to have official announcements for its entire media package ready by its annual football kickoff luncheon July 26.

The $2.64 billion deals with Fox, ESPN and CBS average $440 million per year and nearly triple the amount ESPN and CBS had been paying for the same programming. ESPN signed a 10-year deal worth $100 million annually in 2006 — a payout that increased to $150 million this year due to the addition of Nebraska, Maryland and Rutgers to the conference. CBS paid an average of around $6 million for its current basketball-only deal.

The deal does not include Big Ten Network’s package of rights, which runs to 2031-32. Fox owns 51 percent of BTN.

Like Fox Sports, ESPN will have around 25 football games and 50 basketball games each year — programming that will provide big ratings and an advertiser-friendly audience of diehard alumni in some of the country’s biggest media markets.

The difference between the two packages is that Fox Sports will carry the Big Ten football championship game every season, which is a strong draw each December. Fox also will have game selection advantages over ESPN, which almost certainly means that the coveted Michigan-Ohio State rivalry will move to Fox most years.

Before each season, the networks will pick the weeks where they get first choice of games. Fox will have the first pick every year; ESPN will have the second; Fox will have the third, and so on.

ESPN will carry Big Ten football games on ABC, ESPN and ESPN2. ESPNU will see far fewer Big Ten games than it has in the past.

The Big Ten’s ESPN deal will further a relationship that dates back five decades. ESPN’s sister station ABC started carrying Big Ten games as far back as 1966; ESPN carried Big Ten games in its first year of operation, 1979.

Conference officials experienced some angst earlier this spring that ESPN’s cost-cutting measures would keep the sports media powerhouse from submitting a competitive bid. That led the conference to engage other networks, including NBC Sports Group and Turner Sports. Both media companies expressed interest, but neither was close to a deal.

Soon after news of Fox’s deal leaked in April, however, ESPN President John Skipper called Big Ten Commissioner Jim Delany and said he wanted to re-engage. After a flurry of phone calls and emails, Skipper and Delany reached a broad agreement on price. John Wildhack, ESPN executive vice president of programming and production, and Burke Magnus, executive vice president of programming and scheduling, shook hands on an agreement with Delany and conference lawyer Jon Barrett during a May 19 meeting at the conference’s New York office.

The deals were finalized June 7-8 when executives from ESPN and Fox were holed up in a conference room at the Big Ten’s Chicago offices over two days to hammer out details on how each package would look. Wildhack and Magnus headed up Bristol’s group; Fox Sports executive vice presidents Larry Jones and Bill Wanger and senior vice president Mike Mulvihill were there for Fox. Delany represented the Big Ten, and Big Ten Network President Mark Silverman represented BTN.

Separately, CBS agreed to its deal, keeping the Big Ten basketball tournament semis and championship game on CBS through 2023.

For Delany and the Big Ten, the deal is a clear win. Not only did the conference pick up a significant increase in a down market, but the relatively short length of the deal means the Big Ten will be the first major college conference to renegotiate a new deal in what it hopes will be a more robust marketplace.

The fact that the conference brought in such a healthy increase has to be heartening for the larger sports industry, which viewed these deals as bellwethers for the sports business. Leagues and conferences increasingly have grown concerned that shrinking cable distribution was going to cause sports rights fees to drop.

Plus, the Big Ten was considered the last truly big media rights deal for another five years, when the NHL (2021), Major League Baseball (2021) and NFL (2021-22) see their media rights deals expire. The PGA Tour can opt out of its media deals with CBS and NBC in 2018, and UFC’s deal with Fox ends in 2018.

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